The Future of Alternative Fuel Vehicles in Egypt

The Future of Alternative Fuel Vehicles in Egypt

In 2003, a new company was founded but had only a 10% chance of success, according to its current CEO. Today, it has manufactured nearly 720,000 units and delivered a record of 95,200 cars in Q2 2019. This company is Tesla, and its main product is electric cars.

Last year, the global electric car fleet exceeded 5.1 million, rising by two million cars compared with 2017. China remains the world’s largest electric car market, which resulted from Beijing spending about $60 billion to support the industry over the last decade. India plans to become the first country with 100% electric vehicles (EVs) as the government eases financing by granting an income tax deduction of more than $2,000 on EVs loan interests. The United States also supports the industry through a tax credit between $2,500 and $7,500 for each new EV purchase from any manufacturer that has sold less than 200,000 units.

Meanwhile, the global demand for natural gas vehicles (NGVs) is expected to register a compound annual growth rate (CAGR) of 3% between 2018 and 2025, according to a report by the Grand View Research that cited rising support from governments worldwide for the adoption of NGVs among primary growth stimulants.

In Egypt, the number of NGVs is steadily growing. At a rate of around 2,600 cars per month, Egypt has successfully converted 270,000 vehicles by last March. Meanwhile, the Egyptian Natural Gas Holding Company (EGAS) has set a target to convert another 40,000 vehicles by June 2020. On the other hand, electric cars remain relatively rare in Egypt, with around 1,000 cars in total. However, the first charging station for EVs in Egypt was inaugurated in 2018 on the Cairo-Suez Road and was the seed for a growing network. Therefore, private sector investments and government support are establishing the needed infrastructure and regulatory frameworks for alternative fuel vehicles in Egypt.

National Strategy

The Egyptian government plans to increase the use of alternative fuels to reduce dependence on conventional fuels, such as gasoline and diesel, by introducing electric and hybrid vehicles in both public and private transportation, with an increased focus on converting more vehicles to run on natural gas.

President Abdel Fattah El Sisi has directed the government to convert all public buses to be fueled by natural gas to limit carbon emissions and to encourage more citizens to convert their cars through 71 centers across 22 governorates. The Cabinet is working with the Ministry of Petroleum and Natural Resources, through the Natural Gas Vehicles Company (Car Gas) and the Egyptian International Gas Technology Company (GASTEC), to complete the transformation, according to a press statement by Prime Minister Mostafa Madbouly.

Furthermore, the President has requested the localization of the EV industry, and a recent deal with Mercedes-Benz, not only signaled the return of the German giant to Egypt but will introduce its locally-assembled EVs to the market. Another partnership agreement with China will see the manufacturing of 2,000 electric buses in Egypt by the Ministry of Military Production in cooperation with China’s Foton Motor, the company that will deliver 50 electric buses to Egypt later this year.

In July, the Cabinet reviewed updates on the hybrid and bi-fuel conversion program, and increasing natural gas filling stations. The Egyptian government expects these plans to have positive economic and environmental outcomes, as natural gas is a cleaner fuel. Switching to natural gas reduces carbon monoxide emissions by 86%, carbon dioxide by 21%, and significantly reduces sulfur dioxide emissions and eliminates lead emissions. This could help reduce pollution and improve air quality, especially in the congested capital that is home to around 20 million people.

In addition, a presidential decree in 2018 exempted electric cars from customs and granted NGVs a 35% reduction on tariffs. Moreover, the Ministry of Finance has set the duty on imported electric cars at as little as EGP 15 ($0.9), while in May, the Ministry of Interior announced that it would provide electric car owners with temporary registration plates until the needed regular procedures are completed.

Efforts to transform the fuel industry are more clear in public transportation, with a plan to convert all taxis and minibusses to run on bi-fuel, both gasoline and natural gas, through a three-phase project that will commence in September 2019 until the end of 2022. Financing is now easier due to an initiative by the Central Bank of Egypt (CBE) to provide low-interest loans for taxi drivers to transform their vehicles to run on natural gas. Another plan by the Cairo Transport Authority (CTA) will transform all buses in Cairo to run on natural gas and electricity within three years, with the first fleet of electric buses set to enter service by early 2020. Cairo already received 10 natural gas buses, as the first batch of 121 that will be delivered by mid-2020. In Alexandria, 14 electric buses recently hit Egyptian roads for the first time in the country.

Broad Impacts

“Alternative fuels can help secure sufficient fuel supplies for years, especially since Egypt has already achieved self-sufficiency in electricity. Moreover, reducing dependency on mazut can help free up upgraded refineries to focus on producing higher-quality fuels,” according to Dr. Hafez El Salmawy, Energy Engineering Professor and former Managing Director of the Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA).

El Salamawy believes stability and policy continuity are two main keys to ensure significant progress, noting that it is always easier to transform the public transport system to use alternative fuels, such as natural gas or electricity. “There are about 24 bus garages in Cairo. Building charging stations in each garage could ease the process. Research conducted by some of my students showed that electric buses could reduce the cost of public transportation on the long-term by around 40%, with gradual transformation reducing the payback period. Another benefit is that bus batteries can serve as a 300-megawatt (MW) reserve for the power grid,” El Salmawy said.

Electric buses also do not burn fuel during waiting time, which enhances efficiency and reduces emissions and the carbon footprint, the professor explained.

“I hope the government could soon issue a policy paper to present its efforts in this domain, by setting the short and long term targets for alternative fuels in Egypt. It all comes down to studying the added-value and identifying the best ways to capitalize on sources,” El Salmawy noted, explaining his hopes of comprehensively framing government initiatives to boost support for its plans. “Efficiency is not only about switching fuels, it is rather about how the various components of the energy sector integrate to achieve the vision,” El Salamawy added.

Overcoming the Infrastructure Challenge

The private sector is also playing a part in achieving the targeted transformation by building a solid infrastructure for EVs. Revolta was the first, and so far the only, company to invest in building charging stations. It has set a target to “push electric vehicles technology into the Egyptian market as soon as possible,” which explains why it is also selling new and used EVs from brands such as Tesla, Volkswagen, and Kia.

Revolta is already working on the second phase of its plan to cover Egyptian roads with charging stations, which is expected to be completed by 2020. The company’s network has now reached 72 stations, after the first phase saw the establishment of 65 charging stations across seven governorates, Revolta’s Business development Director Ezz Ibrahim said.

Furthermore, the company is targeting to build 345 stations by 2020, reaching Upper Egypt and covering 90% of the country’s main roads and streets. Ibrahim explained this target as having a station every 90 kilometers, thus allowing users to complete their trips without worrying about their batteries running out since current battery capacities allow a range of 100 to 150 kilometers on a single charge. The plan includes fast-charging stations, where car batteries can be fully charged in 45 minutes or less. Other chargers usually take an hour to an hour and a half, which is why the company is mostly placing them in stations near malls, cinemas, and shopping centers, where users can spend this time doing their regular activities instead of just waiting, Ibrahim noted.

The 2020 target translates into a capacity of 10,000 cars per day. When asked, when will we see this number of electric cars in Egypt? Ibrahim said that he expects it will only take two or three years, as he believes it is only a matter of time before EVs prove a strong presence in the Egyptian market, especially with the increasing government support.

Discussing the motives that can help users switch to electric cars, Revolta’s Business Development Director emphasized that the overall running cost is 70% to 80% cheaper than a conventional gasoline-powered vehicle, due to reduced fuel, maintenance, and spare part costs. “The environmental concern could also be a motive for many users to make this choice,” he further explained.

New cities are another supporting factor for the company’s plan to expand in the market, as Egypt is building a number of smart new cities led by the New Administrative Capital and New Alamein, where including EV charging stations in these cities development and design plans paves an easier way compared with old urban communities. In this regard, Ibrahim noted Revolta’s recent deal with Orascom Construction and Hassan Allam to build charging stations in the New Capital’s Business District that will include 20 towers, led by the iconic tallest building in Africa.

Having the infrastructure will not only make it easier for users to charge their cars, but it could also promote sales and more manufacturers introducing their electric car models in the Egyptian market. Talks with Tesla showed the company’s plan to enter the market as soon as the total number of Tesla cars in Egypt reach about 200, from a current 30, Ibrahim explained.

Besides a variety of Tesla models, Volkswagen e-Golf, and Kia Soul EV; Revolta has sold a number of Hyundai Ioniq and Nissan Leaf models, while other dealers have introduced the BMW i3, Chevrolet Bolt and Spark, as well as the Ford Focus EV. European and Chinese electric cars are expected to increase in the market, especially due to the exemption of custom tariffs.

Expanding in Regional Markets

Revolta is not only focusing on growing its activities locally, it is also working on expanding regionally in markets such as Lebanon and Jordan, with the latter being one of the biggest markets in the region with around 25,000 EVs. This explains why Revolta is building seven charging stations in South Sinai on the road between Egypt and Jordan, according to Ibrahim.

Moreover, Ibrahim explained that Revolta, a partner to Schneider Electric and ABB, is nearing an agreement with an Egyptian investor and an Asian investment fund to establish a $10-million joint venture (JV) that will manufacture electric car chargers for the first time in Egypt. Work on the project is expected to commence early next year. Revolta also wants to develop its own fully integrated software, which can help drivers identify the nearest charging station. “Exporting chargers, cables, and software solutions can enhance Egypt’s position as a regional energy hub.”

Positive Outlook

As Egypt is taking more steps to renovate both the transportation and energy sectors, experts believe the future may yet hold game-changing technologies that would simply redefine the concept of motor vehicles. “The two biggest revolutions in transport are electrification and autonomy. Both are happening at the same time. I think on the long-term, no one will buy a car unless it is autonomous (self-driving). [Otherwise,] It will be like having a manually-operated elevator,” Tesla CEO, Elon Musk, said in the same interview with the BBC where he pointed to the abysmal chance of success that Tesla had when it first started.

By 2040, all cars on most roads around the world are expected to be electric, with a dozen countries led by France and the UK already committing to phase out and ban fossil fuel vehicles by that time in adherence to the Paris Climate Agreement targets. Meanwhile, Egypt is showing signs of catching up with the global trend. Combating climate change, reducing emissions and air pollution stand among the goals of the national sustainable development strategy, known as Egypt Vision 2030.

The rationale behind the plans to increase the use of electricity and natural gas in powering vehicles is driven by Egypt successfully achieving self-sufficiency of both. Although imported fuels were a burden on the public budget and foreign exchange reserves for years. Egypt expects to achieve self-sufficiency of gasoline and diesel by 2022 and start exporting by 2023, thanks to an overhaul of refineries that currently cover over 70% of the local market demand. Nonetheless, using alternative fuels is not about meeting the rising demand only, but also ensuring long-term sustainability.


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